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Dear Readers: I’m currently writing a long-form post twice a
month now for Chris Martenson’s excellent wesbsite. Accordingly,
I’ll be publishing the first (and free) part of these essays here
at Gregor.us. Enjoy. — Gregor

Eventually the point is reached when all the energy and
resources available to a society are required just to maintain
its existing level of complexity.

- Joseph Tainter

The modern world depends on economic growth to function properly.
And throughout the living memory of every human on earth today,
technology has continually developed to extract more and more raw
material from the environment to power that growth.

This has produced a faithful belief among the public that has
helped to blur the lines between human innovation and limited
natural resources. Technology does not create resources, though
it does embody our ability to access resources. When the two are
operating smoothly in tandem, society mistakes one for the other.
This has created a new and very modern problem — a misplaced
trust in technology to consistently fulfill our economic needs.

What happens once key resources become so dilute that technology,
by itself, can no longer meet our growth needs?

We may be about to find out.

Recent History

The twin disasters, Deepwater Horizon in the Gulf of Mexico and
Fukushima in Japan, took place only nine months apart in
2010-2011, but together they have provided the world’s economy
with a lesson in 21st Century un-priced risk. Our various energy
systems, vastly arrayed across regions and hemispheres, have now
reached a late phase of complexity. And societies, particularly
in the West, have enjoyed technological progress for such a long,
uninterrupted period of time that the delicate nature of this
modern infrastructure has evolved to escape notice.

The BP disaster arose within the oil and gas sphere
more than a century after the start of widespread oil extraction.
The collective knowledge of the industry was, in one sense, a
support to the operation that allowed the recovery of oil several
miles below ocean and earth, using ultra deepwater drilling
techniques. But a century of global oil production was also a
constraint, as Deepwater Horizon illustrated the outer reaches to
which a mature industry had been driven to obtain its next
tranche of resources. The capital BP has set aside for cleanup
stands at $40 billion. Additionally, government resources, from
equipment to personnel, that were diverted to the Gulf and Gulf
Coast that summer (see photo above) were reminiscent of a small
military operation.

Deepwater Horizon also showed that modern energy extraction now
occurs with the greatest-ever separation between human operators
and their resource target(s). This physical distance is so great
that, in the case of very deep offshore oil drilling, it’s no
longer possible to reliably stop a blowout. Why? Because no
equipment exists to easily take men and material to such depth to
conduct repairs. Indeed, it was at least as much due to luck as
skill that BP was able to halt the well flow several miles down.
And the almost comical trial-and-error efforts (junk shots)
proved what many have long asserted: In the past decade, the cost
of the marginal barrel of oil has crossed a threshold to a
completely new era. It now becomes possible to ask the question,
Is it worth it? Is it even economic to obtain this new
tranche of oil?

The Fukushima disaster, triggered by the an offshore earthquake,
ripped the lid off Japan’s power grid and illustrated how the
country has historically balanced its lack of domestic fossil
fuel supply against its enormous manufacturing base. On a small
level, the actual sequence of events at the Fukushima nuclear
power plant revealed an amazing vulnerability. For it was not the
passing of the tsunami that performed critical damage to the
installation’s structure; rather, it was the auxiliary power that
was knocked out, depriving the plant of its cooling functions.
Hence the meltdown, and the subsequent issues with recriticality
(resumption of fission).

Meanwhile, on a larger level, the world came to understand how
dependent Japan had become on nuclear power, which provides 30%
of the country’s electricity needs. Japan is also one of the
largest importers of LNG (liquefied natural gas) and still
has to import 80% of its overall energy mix, which includes oil
and a very great quantity of coal. (Indeed, Japan is the fourth
largest world consumer of coal, behind only China, the US, and
India). Unsurprisingly, the country had to significantly boost
imports of LNG and coal in the wake of the disaster.

What has been the cultural response to the Deepwater Horizon and
Fukushima disasters? In the US, the oil spill in the Gulf, which
exacted a great economic toll, echoes the aftermath of other post
oil-spill environments: The moratorium on offshore drilling was
quickly lifted, but in its place lies a new set of regulations
and restrictions. Most of these have a single aim — that similar
blowouts in deepwater be preventable or fixable. The evidence
seems to suggest that deepwater drilling in the Gulf has peaked.
The rig count has recovered but is still down below the highs,
with many of the largest and most expensive operators having left
for other parts of the world.

Meanwhile, the global response to the Japanese catastrophe
rippled through several economies, especially those, such as
Germany, that rely heavily on nuclear power. German chancellor
Angela Merkel announced that her country
had to accelerate its transition to renewables, becoming less
reliant on nuclear. Other countries have increased their
inspection procedures, and for the first time in many years, it
seemed possible that many aging plants in the US would not see
their licenses renewed. In Japan, there have been protests. And
given the long lifespan of the nuclear event, which will ripple
outwards for decades upon the affected portions of the northeast
Japanese coast, it is not surprising.

Western Faith in Progress

Education in the West has, as a core feature of its curriculum, a
narrative of progress. This is especially true of US history
offerings and of any discipline that addresses the
post-Industrial Revolution (roughly the two centuries after
1800). The examples of technological progress most available to
Western cultures, as we moved from the Age of Wood to the Age of
Coal and finally the Oil Age, are highly confirming of the view
that humanity always finds a way. And in particular, it finds a
way to grow, and even thrive.

It is particularly worth noting the symbiotic relationship
between the machines that were developed to extract resources
(like the steam engine that pumped water from coal
mines) and the life cycle of those machines as utilizers of
those resources. Coal mining triggered development of machines
that would run on coal, just as oil would eventually power the
latest machines that would be used to extract oil. It is this
awesome ratchet effect that’s so persuasive to Western culture,
and it is the story it repeatedly tells itself.

One can hardly fault the highly educated person, with an advanced
position in business, communications, technology, or academia,
for generally believing that innovation (and the power of prices)
will obtain all of the resources we require. I believe this
bias is what Daniel Kahneman would call an
availability heuristic. The risk to this bias
is that at some point in human development innovation and
technology may very well carry forward and confirm society’s
faith, but at the same time start to offer increasingly
diminishing returns to progress. In my opinion, that is the
lesson of Deepwater Horizon and Fukushima. And I expect it also
to be the lesson of the Alberta Tar Sands.

There is a lens through which we can view events like Deepwater
Horizon and Fukushima. Charles Perrow, in his important work on
Normal Accident Theory (NAT) examines these accidents by type and
plots them according to their complexity. See, for example, where
nuclear power is located on the following grid: (Source:Accidents, Normal— opens to PDF).

What has begun to take place in global energy extraction is that
the current tranche of resources obtained by more complex methods
— deepwater drilling, underground fracturing, in-situ mining, and
other strip mining — have begun to move towards the
quadrant of Perrow’s chart that is occupied by nuclear power and
chemical plants. Here, systems are both technically advanced and
tightly coupled, which is to say that failures anywhere in their
operations can spread easily and cause systemic failure.

Additionally, the boundaries of those failures can also be rather
broad. That nuclear contamination spreads over large geographical
areas has been known for some time. But Deepwater Horizon warned
that contemporary oil extraction has also crossed the threshold
into very wide boundaries. Despite the current euphoria over
North American shale natural gas and the continuing confidence
that production can be lifted in the Alberta Tar Sands, there are
already indications that groundwater supply is going to become a
much, much bigger issue as we try to increase access to these
resources.

As Joseph Tainter explains (see the quote in the header to this
essay), resources in civilization are eventually marshaled not
for further growth but simply to maintain current systems,
usually in their most advanced iteration. This is the terminal
phase of expansion that the large, OECD regions (Japan, Europe,
US) have likely reached. This is a vexing and frustrating limit
that just about everyone, no matter their political orientation
or economic view, will struggle to digest. For example, in an
analysis of Fukushima’s impact on future energy policy, I thought
this reaction from the team at the BTI Institute, was somewhat
correct but perhaps a bit hasty:

Yet lost in the hyperbolic claims of nuclear opponents, the
defensive reactions of the nuclear industry, and the carefully
calibrated repositioning of politicians and policymakers is the
reality that Fukushima is unlikely to much change the basic
political economy of nuclear power. Wealthy, developed economies,
with relatively flat energy growth and mature energy
infrastructure haven’t built a lot of nuclear in decades and were
unlikely to build much more anytime soon, even before the
Fukushima accident. The nuclear renaissance, such as it is, has
been occurring in the developing world, where fast growing,
modernizing economies need as much new energy generation as
possible and where China and India alone have constructed dozens
of new plants, with many more on the drawing board.

While it’s true that the long-forecasted nuclear renaissance in
the West never took place, with little prospect now that it ever
will, it’s not exactly true that the developing world is choosing
nuclear power in any meaningful way. Coal remains the dominant
energy source in the developing world, for obvious reasons: it’s
portable, it stores well, it remains cheap, and (most of all) it
is not complex.

Given that the externalities of coal use are rather brutal, it
also the case that human beings place steep discount rates on the
future. Society is much more fearful of accidents which take
place suddenly and with little warning, than of the long term
negative effects of a different set of policies on their health.
It may not be logical, but that is our preference.

Tilting Away from Complexity

An emerging theme out of Silicon Valley over the past few years
has been the epiphany that venture capital experienced regarding
the extraordinary difficulty of greentech. “No mas” has
been the conclusion. Why build expensive prototype energy boxes
or invest in large vats of algae, when little apps can
populate quickly across Internet devices, with no heavy lifting
or messy cleanup? The difference between the two worlds has been
summed up like this: In Atoms vs. Bits, it’s undeniable that
“atoms are simply too difficult.” Yes, and this, too, is the
lesson of Deepwater Horizon and Fukushima. If investment in
complex resource extraction has either tail risk that could
overwhelm returns, or externalities that overwhelm the well being
of society, why do it?

In Part II: Why We Must Embrace
Simplicity Now, we explore how diminishing returns have now
triggered in our various complex systems. Eventually it will
become clear that the cost to repair damages from their
destructiveness is simply too great. Technology is practically
telling us (begging us?) to place less faith in its ability to
solve all problems.

It’s obvious that our elected leadership has no concept of a
growth limit that could render the economy’s obligations
insoluble. The Fed transcripts are yet one more piece of evidence
that unless we get a better handle on the enormous, complex
systems we are already operating, we will continue to suffer more
frequent and painful “unexpected” economic accidents. Given our
track record in this regard, the alternate route would be to step
back from these complex systems and regain our footing in
simplicity. Or else maintain the status quo approach until market
forces pressure us to.